Why we still have Swiss wine tariffs

GENEVA, SWITZERLAND – New import allowances for wine, for individuals, are part of an overhaul of Swiss customs duties, designed to simplify and speed up customs work at borders as traffic continues to increase. Switzerland shares borders with Italy, France, Germany and Austria, all of which produce wine.

Some media articles about the new changes note that the federal government was contemplating getting rid of import duties on wine altogether, but it gave in to pressure from the Swiss wine industry.

There’s some truth in this, but it’s easy to misunderstand this as a simple protectionist mentality and the picture is more complex.

Why smugglers love Switzerland

Switzerland is an excellent target for commercial wine smugglers. Wine consumption has slipped in the past 20 years, but nowhere near as much as in Italy, France and Portugal, where 25 years ago average consumption was between 17 and 20 litres of alcohol per year per person.

By 2009 it had dropped to 6-7 litres per person (wine only), according to figures published by the Wine Research Institute at the University of Adelaide.

Austrian and German wine consumption have slipped in line with Swiss, but a significant difference is that Switzerland leads the “traditional” wine markets for the value of bottled imported wine, calculated in US dollars: just under $7 in 1990-94 and up to $8.30 by 2009. The figure for the value of bottled imported wine for number two Norway was about $6 in 2009 and for Germany $3.

The Swiss have continued to drink while their neighbours’ consumption figures have nose-dived, and the Swiss are willing to pay for better wine. If you’re a smuggler looking at large and unsold quantities of wine, Switzerland begins to look very attractive.

Smuggling: a good business

Jean-Claude Duvoisin, who heads the anti-fraud unit for Western Switzerland in Lausanne told me two weeks ago that while the extent of the problem is stable, wine-smuggling is a professionals’ business worth millions. He was showing six wines from France to a group of journalists, the label-free backs of the bottles to us because the producer was not involved in the fraud, he said. The six were from a lot of 3,500 litres of undeclared wine seized by Bardonnex officials in Geneva in 2013.

The rest of the wine was destroyed.

Swiss import taxes on wine have long been among the lowest in Europe, especially on premium or top-dollar wines. On the other hand, there are no tariffs on wine within the EU, but Switzerland, not a member of the EU, has had a complicated set of rules that distinguishes eight categories of alcoholic beverages, adding to importers’ costs.

20 years of open market hasn’t killed Swiss wine

The Swiss wine market was opened to the outside world in the 1990s, after heated debate – a 1994 remark by one politician was typical, arguing that with 1% of its wine exported and 55% of wine consumed coming from elsewhere, opening the market would kill the home wine business.

The doors were thrown open and imports rose but they’ve now stabilized.

In 1994-95 total consumption was 2.9 million hectolitres of wine, of which 1.67 or 58 percent was foreign and 1.25 hectolitres were Swiss wine.

By 2012 total consumption was down to 2.67 million hectolitres with foreign wines accounting for 63.7 percent, at 1.7 m hectolitres out of 2.67m. Cheap wines from South America were the fear 20 years ago but wines imported today are mainly from Italy, Portugal, France and Sapin.

A factor often overlooked is that the foreign population in Switzerland has grown during this time, and it includes a large number of residents from those four countries – who import and drink their own nations’ wines.

Imports have a larger share of a smaller home market, but while they have increased so have exports. These still account for a tiny share – under 2 percent – of Swiss wine production. That hasn’t been enough to avoid a squeeze, particularly for Swiss producers of white wine. Given that the export market offers  more potential for Swiss wines than getting back market share at home, the focus is turning to the hurdles to exports, not closing the door on imports.

Where your wine imports and smugglers come together

Nevertheless, Swiss wine produers are not keen to let go of any more home market share and one of the threats comes from smuggled wines.

Most of the wine smuggling trade occurs in small quantities, Duvoisin says, with small vans and cars carrying crates the drivers hope to pass off as wine for their private consumption. They don’t declare it and hope to come in under the net, since not all cars and small vans are stopped and inspected at the border, say customs officials. “Commercial” is defined as any wine that you sell, so if you bring in three cartons for home consumption, it’s private, but if you invite 18 people to a wine tasting evening at your house and you ask them to each pay for a bottle, you’re in the commercial wine business and the paperwork alone is going to increase the price of your wine.

Smugglers are not trying to avoid just the import duty, but a series of onerous legal obligations that start in their home countries and that help ensure consumers get what they think they are buying, customs officials point out.

The new allowances provide one means of fighting illegal imports. They do also give Swiss wine producers a little breathing room while they work out how to export on a larger scale.